Buy-Sell Agreement Planning Checklist Page 6
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16Provisions for an inter vivos sale
The following is a general list of factors that should be considered when planning for the
2
sale of shares of a business
.
1. Shareholder loans – Loans to the company held by the selling shareholder should be
settled prior to the sale closing.
2. Guarantees – The vendor should be released from any guarantees of obligations of the
company.
3. Share certificates – The share certificates should be endorsed in blank for transfer and
held by an escrow agent pending full payment of the purchase price.
4. Payment schedule – A payment schedule should be created specifying the timing of
payments, and should include provisions for prepayment and extensions.
5. Security – The balance of the purchase price may be secured. A promissory note, a
pledge of the shares, or a mortgage are typical forms of security.
6. Tax indemnification – The vendor may agree to indemnify the purchasers in respect
of any additional tax liability which may arise as a result of a reassessment of the
company by Canada Customs and Revenue Agency, C.C.R.A. (formerly Revenue
Canada) or any other tax authority for a fiscal period during which the vendor was a
shareholder.
7. Resignation – The vendor may be required to resign as an officer, employee and
director of the corporation.
8. Restrictive covenant – A restrictive covenant may be prudent to ensure that the
vendor does not compete against the business being sold in the same market or
geographical location.
2
Shareholder Agreements – A Tax and Legal Guide, Jack Bernstein, CCH Canadian Limited,
1988
5
ADVERTISEMENT
0 votes
Related Articles
Related forms
Related Categories
Parent category: Business